Internal Auditors: Truth Tellers...

Why don't folks talk to internal auditors?  Because most folks feel it's pretty difficult, if not impossible, to tell an internal auditor anything.  Equally, most folks believe it's rather exceptional to ever discover an internal auditor who is willing to listen.

I've often wondered if God has an internal audit function? Y'know, someone of supreme knowledge continually remarking on the multitude of imperfections which arise in the world. Could Satan have been the first internal auditor? An archangel cast down in exasperation for excessive pride and kibitzing? The comparison may not be as far fetched as you might think. Certainly many a CEO has come to view an internal auditor as a "Prince of Darkness" and muttered prayers for the transportation of the "infernal auditor" to some high-temperature place of unpleasantness.

Unheavenly conflict over the internal audit function, when it surfaces, is often brutal, extremely visible, and always destructive to an organization. The source of "the heat" usually derives from friction in one of three areas: 1) professionalism, 2) reporting, or 3) trust. These are "tinder" issues where even a slight spark may result in a major conflagration. Let's see why...

In hiring internal auditors, professionalism is the key. There are three types of individuals you don't want to employ as an internal auditor. Don't hire the type who are always surprised when they turn over a rock and find a snake. Don't hire the type who are always disappointed when they turn over a rock and don't find a snake. And, most assuredly, don't hire the type who are afraid to turn over rocks and look! Your best candidates should never assume they "know better" than the folks who actually do the work; should not take themselves too seriously; and should trust everyone, but still require that the cards be cut. Intelligent diplomats in the audit field, much like Faberge eggs, should be highly prized, highly praised, and highly paid.

Next, internal auditors should report directly to the Board of Directors - never to the CEO. Sorry, internal auditors reporting to a CEO is a first rate example and excellent definition of "conflict of interest." Do you permit a single individual to verify cash? Of course not. Do you permit a loan officer to approve her own loan? Of course not. Dual control applies everywhere but at the top - right? Of course not. Best practices require that internal auditors report to the Board of Directors with complete copies of all reports delivered contemporaneously to the Supervisory Committee and the CEO. An internal audit function works well only when we practice the belief: "We're all in this together." Get your reporting structure right. What have you got to fear (or hide!)? 

But having the best people and the proper procedures is never enough. As with all important relationships, the grease which eliminates friction is trust. In a perfect world, all participants in the internal audit function are impartial, forthright, rational, caring individuals. In a perfect world, everyone works together for the greater good. But, unfortunately, this is not (surprise! surprise!) a perfect world.  Responsible Boards and competent CEO's know their credit unions aren't perfect.


To build trust in an imperfect world requires three things. First, always tell the truth. Second, always tell the whole truth. And, lastly, always tell nothing but the truth. Does that sound familiar? "Do you swear to tell the truth, the whole truth, and nothing but the truth?" Ever pondered why that phrase was so intricate? An excellent internal auditor must understand the truth. An excellent internal auditor must understand that the truth, like beauty, is often in the eye of the beholder. And, an excellent internal auditor must understand that the truth is always subtle and rarely simple. Telling the truth takes discipline. Telling the whole truth takes grace. Telling nothing but the truth takes courage.

As a leader (audit or otherwise), never go looking for trouble;  but never be afraid to look....